RMD on Cash Balance Pension

[tgreszler]

I will be 72 this year (2022), so am subject to RMDs.  In March, I rolled my cash balance pension plan into a traditional IRA.  My understanding is that the plan administrators should have excluded the RMD from the IRA roll-over and instead distributed it outside of the IRA.  This was not done.  I called the plan and asked them to either provide the amount of the RMD or the account balance as of Dec. 31, 2021 so I can determine the RMD.  However, they tell me no RMD is required and have not provided the Dec. 31 balance.  I have asked them to state this in writing.   Do I need to take and RMD and how should I determine the amount? 

[TomD8]

If you were born after June 30, 1949, no RMD was required for 2021.

Retirement Topics — Required Minimum Distributions (RMDs) | Internal Revenue Service (irs.gov)

[tgreszler]

My question refers to the RMD for 2022, not 2021.  

[NCperson]

@tgreszler -  if you were born in 1950 (and therefore turning 72 in 2022), isn't your RMD requirement:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-di... 

Beginning date for your first required minimum distribution

• IRAs (including SEPs and SIMPLE IRAs:
  
  • April 1 of the year following the calendar year in which you reach age 72, if you were born  after Jun 30, 1949.

So your 2022 RMD is required no later than April 1, 2023. There is time to figure this out.  There was no online tool that provided the balance as of 12/31/21???? But you know the balance at the time of transfer to the IRA, right? 

What year did you retire? 2022?????

[dmertz]

Are you still employed with the company providing the plan and not a more than 5% owner of the company?

[tgreszler]

I retired over 5 years ago and have no ownership.  

[dmertz · Accepted solution]

Then yes, before the rest was rolled over to the IRA in 2022, there should have been the 2022 RMD paid to you from the plan based on the 2021 year-end value of your interest in the plan.  The RMD amount that was inadvertently deposited into the IRA constitutes a regular contribution to the IRA rather than a rollover and, if you have no compensation to support such a regular contribution, that entire amount constitutes an excess contribution to the IRA that needs to be distributed by an explicit return of contribution before the due date of your 2022 tax return, not by a regular distribution.  The amount distributed will be the amount returned adjusted for investment gain or loss.  If there is a gain, the gain will be taxable on your 2022 tax return.

If the plan issues a code-G 2022 Form 1099-R showing the enter amount moved to the IRA instead of a code-G Form 1099-R showing only the permissible amount of the rollover and a separate code-7 Form 1099-R for the RMD amount and any tax withholding and refuses to make the correction, you'll need to submit substitute Forms 1099-R (Forms 4852) with your 2022 tax return to correct the reporting.

[fanfare]

@tgreszler 

"The RMD amount that was inadvertently deposited into the IRA"

If you take out that RMD as an excess contribution to the IRA,

you will have effectively taken your RMD from the 401k.

You probably want to report that as a pension distribution on line 5 to satisfy the 401k RMD.

the IRA custodian will also calculate associated earnings which could be positive or negative (this doesn't matter).

So, explaining this on your "explanation statement"  and substitute 1099-Rs to the IRS will be required.

Turbotax CD/download supports an explanation statement and e-File.

[tgreszler]

Thank you.  This confirms what I suspected and provides information on how to handle it.  

[tgreszler]

Thank you. Just to clarify, the originating account was a Cash Balance Pension Plan, not a 401K, but I don't expect this changes your answer.

[dmertz]

Defined benefit plans such as a cash balance plan are subject to the same RMD requirements as a 401(k).  When paid out as an annuity, the pension payments are calculated by the plan to satisfy the annual RMD requirement.  When instead distributed as a payout or buyout rather than an annuity, it's treated the same as a distribution from a 401(k).  In a year for which an RMD is required, distributions are RMD until the RMD is satisfied and RMDs are ineligible for rollover.